India Inc preferred the debt route in the first three quarters of the financial year 2008-09. According to figures from Prime Database, debt private placements rose 46 per cent, as compared with the corresponding period in FY08. A total of 126 companies raised funds via this route.
In the first nine months of the current financial year, companies and financial institutions mopped up Rs 1.18 lakh crore, as against Rs 80,900 crore in FY08.
Debt private placement is the sale of securities directly to an institutional investor such as bank, mutual fund, insurance company and pension funds.
This was primarily due to the sluggish equity markets. “Money markets were tight in second half of the fiscal and QIPs, IPOs were not happening. This forced companies to raise money through this route,” said Prithvi Haldea, managing director, Prime Database.
The maximum mobilisation was done by the private sector in percentage terms. Their mobilisation increased by 143 per cent Rs 42,766 crore. Financial institutions and banks recorded a 10 per cent increase to Rs 65,358 crore.
The largest amount was raised by Power Finance Corporation (12,613 crore), followed by Rural Electrification Corporation (Rs 8,943 crore) and Reliance Industries (Rs 8,000 crore).
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Among banks and financial institutions, HDFC, IDBI, SBI, ICICI Bank and LIC Housing Finance raised money through private placements.
Experts said that while private placement of debt securities has increased manifold in the last few years, only a few institutions opt for this route. This is because there isn’t a vibrant corporate debt market in India. In fact, it is quite illiquid. Institutional buyers also look at only rated bonds.